Outback Steakhosue

Outback Steakhouse bounces back in 1Q

Casual-dining operator quickly recovers from a weak fourth quarter

What a difference a quarter makes.

Same-store sales at Outback Steakhouse increased 1.4 percent in the first quarter ended March 26, parent company Bloomin’ Brands Inc. said on Wednesday. 

That bested other casual-dining chains in the period, and it was a major improvement from the fourth quarter, when same-store sales fell 4.8 percent.

The results bolstered Bloomin’ Brands’ financial results in the quarter, and investors cheered the news. The company’s stock rose 6 percent through early afternoon trading on Wednesday.

“We saw meaningful, sequential improvement in sales trends,” Bloomin’ Brands CEO Liz Smith said during the company’s earnings call Wednesday. “Overall, we’re pleased with our Q1 results.”

Overall, U.S. same-store sales at Bloomin’ Brands’ four concepts fell 0.2 percent in the quarter. Same-store sales fell 3.8 percent at Carrabba’s Italian Grill, 2.9 percent at Fleming’s Prime Steakhouse and 0.8 percent at Bonefish Grill.

Total revenue for the quarter declined 1.7 percent, to $1.14 billion, from $1.16 billion the previous year. The company closed 43 restaurants during the period.

Net income adjusted to factor out one-time events increased 2 percent, to $57.3 million, or 54 cents per share, from $56.2 million, or 47 cents per share.

Bloomin’ Brands has focused on eliminating discounting while concentrating on increasing takeout and delivery orders and improving customer service and food quality.

The company is making $25 million in investments at Outback Steakhouse, most of which will be in the form of food costs, executives said.

For instance, a center cut sirloin introduced in the middle of last year has since led to steady improvements in “steak satisfaction metrics.” In the first quarter, the company made changes to its steak preparation and portion sizing, and reduced complexity.

The company has its own customer panel that has indicated such efforts will in time generate traffic, Smith said. The investments typically generate results 26 to 39 weeks after they are made, she said, as existing customers return.

“Healthy traffic builds over time with frequency of our core consumer,” Smith said.

Smith has become an evangelist for the idea of reduced discounting in casual dining. The company has shifted away from discounts and worked to eliminate price promotions.

“We remain committed to our march to reduce discounting across the system,” Smith said.

The company will continue this march, she said, even though the casual-dining segment remains “volatile,” and there could be pressure on the chains to generate traffic.

“We’re not going to revert to additional discounting,” Smith said. “We know that is not the right solution for us. We’re going to be patient, and deliberate, and invest in the 360-degree experience.” 

Bloomin’ Brands is also focused on driving more off-premise business, which Smith said could give large chains an advantage over time as they make investments in that area. She also said it gives casual dining an opportunity to generate traffic, something these concepts have lacked for more than a decade.

The company is also testing delivery at 116 restaurants, using both third-party delivery providers, as well as its own network of drivers.

“Early results have been encouraging,” Smith said. “They validate our belief there’s strong demand for our food to be consumed at home. It’s incremental.” 

She also said that could help casual-dining chains during the holiday season, which may offset losses in customers as people shop online more and in stores less. 

Indeed, the weak fourth quarter could be a sign of things to come.

“We do think Q4 was a harbinger of how things are going to change with the retail landscape,” Smith said.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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